"We never had any doubt that the position we have taken was going to find that it was in line with the international rule book on trade," he said.

However, the European Union has already said it will hold fire on imposing the sanctions in the hope that the threat alone will force Washington to make the necessary changes.

"[The WTO] has given us an amount of potential countermeasures which will create a major incentive for the US to eliminate this huge, illegal export subsidy," said the EU's trade commissioner, Pascal Lamy.

It also fears that such hefty sanctions could provoke a political backlash in America which could severely damage transatlantic trade relations.

The WTO's director-general, Mike Moore, said the EU and the US should get together to resolve the dispute "in an amicable and constructive fashion".

"The European Union and the United States are among the most important members of this organisation and both hold a special responsibility to ensure the continued health and soundness of the WTO and global trading system," he said.

"I believe that today's findings will ultimately be rendered moot by US compliance with the WTO's recommendations and rulings in this dispute," Mr Zoellick said.